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Kunal Shah, founder, Cred. The firm claims it processes 20% of all credit card bill payments in India. MINT
Kunal Shah, founder, Cred. The firm claims it processes 20% of all credit card bill payments in India. MINT

At fresh fund raise, Cred resets Esop expectations

  • Cred raises $81 million in a Series C round at a post-money valuation of $806 million

Credit card payment service Cred on Monday said it has raised $81 million in a Series C round at a post-money valuation of $806 million, inching close to a unicorn status (valuation of $1 billion or more) within two years of founding.

The company also permitted the liquidation of employee stock options worth $1.2 million (about 9 crore), in a move that could reset expectations in the startup ecosystem.

While the amount is relatively small, it’s not often that staff at Indian startups have had the opportunity to sell their vested stock options so early in the life of a company.

Also read | India’s hunt for the new Vision 2020

Cred’s fundraise was led by existing investors DST Global along with Sequoia Capital, Ribbit Capital, Tiger Global, and General Catalyst. Sofina, Coatue and Satyan Gajwani of Times Internet also participated in this round.

“As we raise funds to support our next phase of growth, it’s important to acknowledge the role that employees have played in our success. We are committed to enabling wealth-creation opportunities for them and have allocated 10% of our cap table allocated for Esops even at the Series C stage," said Kunal Shah, founder of Cred.

The employee stock ownership plan buyback was completed on 1 January. Employees holding vested stocks were eligible to sell as much as half of their holding.

“Esop monetization during Series C stage is a very positive and encouraging sign as employees can see actual money. Normally, Indian startups wait for a monetization event like an exit or when they get acquired for the employees to encash their vested options. So the trend of Esops being bought when there is fundraising is very encouraging and a good signal for other early-stage startups. It will attract more people to the startup ecosystem," said serial entrepreneur K. Ganesh, who has promoted or invested in companies such as BigBasket, Portea Medical and HomeLane.

“The creation of Esops at the time of incorporation will lead to shrinkage in wealth creation time for employees through stocks," said Santosh N., managing partner at D and P India Advisory LLP, a consultancy.

Startups have now started thinking of Esops early, and this has allowed for liquidation opportunities also to come early, he added.

“Seasoned founders definitely understand the importance of Esops on the cap table. Contrary to the West, Indian startups earlier used to create Esops during the late stage of the company and were often pushed by investors to do so. Now, this has changed to early-stage startups creating space for Esops on their cap table right from the time of incorporation. This will lead to not just better wealth creation but also attract robust talent towards Indian startups," said Santosh.

Cred said it now has more than 5.9 million “high-trust" individuals with a median credit score of 830 and processed 20% of all credit card bill payments in India.

The credit scoring system ranges from 300 to 900, with those with a score of 900 being considered the most creditworthy.

Over 35% of premium credit cardholders in India are on Cred, with members spending twice the average credit card user in the country, the company said.

Several startups, including Unacademy, Zerodha, CarDekho, BharatPe, Meesho, and Swiggy, announced Esop buybacks last year.

In November, foodtech unicorn Swiggy initiated an Esop liquidation programme of $7-9 million to reward its employees as the food delivery business recovers to pre-covid levels.

Esops assume more significance when they happen after many startups have witnessed a financial crunch amid the novel coronavirus pandemic and has cut jobs and slashed salaries.

This continues to be a strong tool for founders to retain employees as they emerge from the crisis.

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